I saw a comment about the drop in the U.S. Federal debt-to-GDP ratio, which reminded me that I wanted to discuss it once the data started to settle down. As can be seen in the above chart, the public debt-to-GDP ratio went from 135% in 2020Q2 to 120% in 2022Q3 (latest figure on FRED). A drop of (roughly) 15% in the ratio without some kind of “austerity” policies might seem surprising — but it is only surprising if you look at debt dynamics the wrong way. That wrong way is relying on “real” variables — real GDP growth, real interest rates — as well as thinking too much about long-term “steady state” or “equilibrium” values.Bond Economics
The reliance on “real analysis” (ha ha) leads to silly things like charts of the U.S. debt/GDP ratio marching in a straight line towards 200%. (Yes, CBO, I am not laughing with you.) This framing also leads to neoclassical economists going on about the question: is r greater or less than g?...
Debt/GDP Ratio: Beware "Real Analysis"
Brian Romanchuk
8 comments:
You have to stand back and wonder why Brian is convinced this battle of ideas can be won in a class room. Every article can be summed up if only they would listen we can teach them.
He is so detached from the real world and history it really is quite staggering he can't see what has been in play since the Berlin Wall was put on wheels. Completely missed by a country mile why things were set up the way they were.
Monetarism is and always has been a Trojan horse. A geopolitical tool that once implemented along side the US rules based order ensures entrampment. Combined with deficit and debt rules and you are off to the races.
Brian thinks all we have to do is educate the Western elite and the ju ju stick will be stopped.Dream on Brian dream on. The ju ju stick works exactly as it was intended.
The key to change is understanding why people are fooled by an obvious statistical autocorrelation
It uses the same tricks as any other religion. Always remember the Maharishi Effect has 'scientific papers' showing how it works.
It’s a cognitive reification error…
“ they don't already know and have known for hundreds of years.”
We went off gold in 1971 it hasn’t really been that long.,, it’s still within a human career…
Those who can do, do. Those who can't, teach.
Footsoldier: somebody has to continue to say this in a "classroom context", otherwise we will return -- publicly -- to the insane intellectual debates of the 80s and 90s. You are not wrong, IMO, but Brian's work is a necessary, but not sufficient, response to monetarist idiocy.
Marian: When you appreciate the effects of corruption, you appreciate why some lessons cannot be taught.
The intellectual debates of the 80s and 90s were no more distracting than the woke debates of today.
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